In the first part of a two-part series, we look at PG&E's aging electrical infrastructure and how delayed maintenance has become a threat to public safety.

Tim Russell, Principal Credit Analyst

Autumn in California has once again been ushered in by Santa Ana winds and dry conditions, leading to another dangerous fire season. In the wake of last year's devastation, Pacific Gas & Electric (PG&E) is using frequent and large-scale blackouts to lessen fire hazard during high risk conditions. As of the last week of October, some communities in PG&E's service were facing their fourth blackout in a three-week period. At times as many as 2.7 million people have been left without power. 

Over the past several years, PG&E's equipment failures have been blamed for several destructive fires that have led to numerous fatalities in addition to extensive property damage and hundreds of thousands of acres being destroyed. The fires have left PG&E facing billions in liability claims, leading the company to seek bankruptcy protection earlier this year (read our blog on the topic here).

The condition of PG&E's equipment is paramount in understanding how the story fits together. Case in point: tower 27/222 is a nearly 100-foot steel tower located in the Sierra Nevada foothills. It carried one of PG&E's oldest high-voltage transmission lines, the Caribou-Palermo line. In December 2012, five other aging towers on the Caribou-Palermo line collapsed in a storm. In a 2014 email, PG&E stated that "the likelihood of failed structures happening is high" but determined the probable cause would be heavy rain, precluding a wildfire risk. In October 2016, a company email noted that some of PG&E's structures on the Caribou-Palermo line were threatening to break down and reported corrosion at one tower was so severe that crews were endangered while trying to repair it. At 99, tower 27/222 was more than 25 years past its useful life. Despite several early warnings the company failed to heed, the tower was left in operation. On November 6, 2018, PG&E began notifying customers of the potential that it would turn off power for safety given forecasts of extreme fire danger conditions. After being heavily criticized for previous shutoffs and facing immense pressure over the oncoming shutoff, PG&E announced early on November 8, 2018 it was not proceeding with the shutoffs because weather conditions didn't warrant them. Later that morning, a failure at tower 27/222 is believed to have caused the Camp Fire - the most devasting fire in the state's history which ultimately killed 86 people and destroyed the city of Paradise. 

Tower 27/222 is just one example of PG&E's aging infrastructure. In a 2017 internal presentation obtained by the Wall Street Journal, PG&E estimated a tower's mean life expectancy to be 65 years. The utility further reported its transmission towers were aged an average of 68 years with the oldest clocking in at 108. Since the Camp Fire, PG&E undertook a large-scale inspection of its system, identifying some 1,200 serious safety concerns and another 10,000 needed repairs. As a result of this inspection, the decision was made to retire the Caribou Palermo line after evaluating the work required to operate it safely. The inspection further showed 16 of PG&E's 20 worst performing lines - those with the highest number of unexpected outages - are located in high-risk fire areas. The utility has stated that it will require a decade to complete the upgrades.   

PG&E has been accused of operating with the philosophy of running its equipment to the point of failure to save money.  With ten of California's top 20 most destructive fires occurring in the last three fire seasons, residents and officials have pressed for change. As work commences to repair and replace its equipment, PG&E has communicated it will continue utilizing rolling blackouts to prevent fires in an effort to protect public safety. Until PG&E is able to complete its infrastructure upgrade, the citizens of northern California will have to adapt to a new normal created in part by PG&E's deferred maintenance.

The cautionary tale of Tower 27/222 is clear on one point: delayed infrastructure spending can be a real threat to public safety. In the next installment of this series, we look at the overall health of infrastructure in the United States. Stay tuned!

Sources

Blunt, Katherine and Gold, Russell, "PG&E Knew for Years Its Lines Could Spark Wildfires, and Didn't Fix Them," Wall Street Journal, July 10, 2019

Blume, Howard, "PG&E Warns of 10 Years of Power Shut-offs. California Officials Don't Like It," Los Angeles Times, October 19, 2019

Cal Fire, Top 20 Most Destructive California Wildfires, February 8, 2019

California Public Utilities Commission, De-Energization Reports, www.cpuc.ca.gov/deenergization

California Public Utilities Commission, Fire Incident Data, www.cpuc.ca.gov/fireincidentsdata

Gold, Russell, et al., "How PG&E's Aging Equipment Puts California at Risk," Wall Street Journal, October 29, 2019.

Penn, Ivan, et al., "How PG&E Ignored Fire Risks in Favor of Profits," New York Times, March 18, 2019

PG&E News Release, PG&E Determines to Not Proceed with Public Safety Power Shutoff Planned for Portions of Eight Northern California Counties, November 8, 2019